TORONTO - Trading in the first full week of 2014 will likely be cautious as investors hope that fourth-quarter earnings will justify last year's big run-up in U.S. markets.

The markets will also digest a slate of top-drawer economic data, culminating at week's end with December employment reports for Canada and the United States.

The coming week will see the first run of U.S. earnings reports trickle in from companies like resource heavyweight Alcoa Inc., which reports on Thursday.

Expectations are high that the latest report card from corporate American can help keep intact the strong gains registered on U.S. markets last year, where the S&P 500 soared 30 per cent. The TSX gained a more modest 9.5 per cent, pulled down by sliding mining stocks.

"I think earnings growth will be decent for the quarter but I don’t think it’s going to be strong enough to validate the enormous expansion multiples we saw for the U.S. indexes last year," said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.

The S&P and other global indexes got a huge boost last year from the U.S. Federal Reserve’s massive bond buying program, which the central bank is starting to unwind.

"We got a 30 per cent increase in the S&P mainly because the Fed was pumping in a trillion dollars worth of liquidity (annually). So, now we take the Fed out of the equation."

The Fed ended months of speculation last month and announced it would be cutting back on its US$85 billion of monthly bond purchases.

Pyle said investors will also be expecting a stronger showing in revenue growth for the fourth quarter after topline growth fell short of expectations over the previous three quarters.

"If you can turn that around, if these economic fundamentals that we have been looking at out the window are actually real, that the U.S. economy is actually picking up steam, and Europe too, and that translates into good topline numbers, then that in itself actually might be enough to support this market."

Otherwise, Pyle said, he doesn't think the run of earnings can support the sharp run-up.

Bloomberg News says that earnings are expected to rise 3.7 per cent in the fourth quarter, excluding financial companies.

Quarterly earnings in Canada lag the U.S. by a few weeks. The major TSX-listed report next week comes from Quebec-based drugstore chain Jean Coutu (TSX:PJC.A). Analysts expect adjusted earnings of 28 cents a share.

North American markets closed little changed for the week with the TSX down 39 points while the Dow shed eight points.

On the economic front, traders will be looking to the release of the minutes from last Federal Reserve meeting held in mid-December when it was decided to start tapering. The minutes are always a priority item but perhaps less so this time.

"Maybe there will be some question about whether they could have been more specific about the tapering program, which could add some wrinkles," said David Watt, chief economist at HSBC Canada.

"But given the economic projections that came out in the last one . . . I just don’t think it could have anywhere nearly as much market reaction."

The Fed said last month that decisions on more tapering would be based on economic performance so the release Friday of the December non-farm payrolls report will be the big event of the week.

Investors hope that the U.S. will be able to maintain job growth of at least 200,000, at it has done for the previous two months. Economists forecast job growth of 195,000.

"We’re haven’t quite gotten the confidence that we’re going to get that 200,000 jobs created on a consistent basis," added Watt.

Canadian job numbers for December also come out on Friday. Watt said he expects job creation to come in at about 10,000 for the month, below market consensus of 13,000 jobs.

Elsewhere on the corporate front, Valeant Pharmaceuticals International Inc. (TSX:VRX), one of Canada's largest life sciences companies, will provide its financial guidance for 2014 on Tuesday. The company, which has its headquarters in Laval near Montreal, has been growing rapidly through numerous acquisitions in recent years.

News from © The Canadian Press, 2014